How Music Royalties Actually Work (In Plain English)

The short version

Music makes money in more ways than most people realize, and the money flows through different channels depending on which thing earned it: the song (composition) or the recording (master). Understanding the basic map is what lets you know whether your paperwork is capturing everything you are owed.

The two things that earn: composition and master

Every piece of recorded music is actually two separate assets:

1. The composition is the underlying song: chords, melody, lyrics. It is owned by the songwriters and their publishers.
2. The master recording is the specific recorded performance. It is owned by whoever created or paid for the recording, meaning the artist or a label.

These earn money separately, are owned separately, and are documented by separate agreements. This is the single most important concept in music money: the same song can pay the writer (composition) and the recording owner (master) as two different revenue streams.

The main ways music earns

Streaming. When a song streams, it generates royalties on both sides: a payment tied to the master recording (usually to the artist or label) and a payment tied to the composition (to the songwriters and publishers). One stream, two royalty types.

Performance royalties. When music is played publicly, whether on radio, in a venue, on a TV show, or through a streaming service, the composition earns a performance royalty. This is collected by PROs (Performing Rights Organizations like ASCAP, BMI, and SESAC) and paid to the songwriters and publishers. This is why registering your songs with a PRO matters: it is how you get paid when your song is played.

Mechanical royalties. These are owed to the composition owners whenever a song is reproduced, historically on physical copies and now primarily through streaming and downloads. In the US, mechanical royalties for streaming are handled through a collective system run by the Mechanical Licensing Collective.

Sync royalties. When music is placed in visual media, whether a film, TV show, ad, or video game, that is a sync (synchronization) license. Sync deals typically involve a one-time fee, and they require permission from both the master owner and the composition owner. Sync can be lucrative and is a major income source for many artists.

Sales and downloads. Direct purchases still earn, on both the master and composition sides.

Neighboring rights: the master's performance royalty

There is one more stream that is easy to miss, because it sits on the master side. When your composition is performed publicly, your PRO collects a performance royalty for the songwriters. But the recording itself can also earn a performance royalty when it is played, and that money is collected by a completely different body.

These are neighboring rights: performance royalties owed to the performers and the master owner when a master recording is publicly performed, as distinct from the PRO performance royalties owed to the songwriters on the composition. In the US they come mainly from non-interactive digital and satellite radio (internet radio, SiriusXM), and internationally from the broadcast and public performance of recordings.

Neighboring rights are collected by a neighboring rights organization (NRO), not a PRO. In the US the NRO is SoundExchange, which pays the featured performers and the master owner directly. This is separate from your PRO's performance royalties (composition) and separate from the MLC's mechanicals (also composition). It is the master's own slice. Together those three bodies, the PRO, the MLC, and the NRO, make up your collective management organizations (CMOs), each collecting a different part of what you are owed. Register with all three and you collect every slice; skip the NRO and the master's performance money goes uncollected.

Because the recording and the song are two separate assets that earn separately, this pairs naturally with the master vs. composition guide, and with copyright basics for musicians for how the two copyrights underpin all of it.

Why the paperwork matters to the money

Every one of these income streams depends on ownership being clear and registered:

• Performance royalties only reach you if your song is registered with your PRO under the correct splits.
• Streaming composition royalties depend on correct songwriter registration.
• Sync deals cannot close if the ownership is murky, because a music supervisor will not license a song they cannot clear.

This is why split sheets, songwriter agreements, and producer agreements are not bureaucracy. They are the infrastructure that makes sure the money finds you. A song with unclear ownership is a song that either cannot earn or earns into a dispute.

PROs and why you register

A PRO (ASCAP, BMI, SESAC, or Global Music Rights in the US) collects performance royalties on behalf of songwriters and publishers. You affiliate with one, register your songs and their splits, and they collect and pay you when your music is performed publicly. Your IPI, or CAE, number is the ID your PRO uses to identify and pay you, which is why split sheets ask for it.

How keysig helps

keysig does not collect royalties. That is your PRO and distributor's job. What keysig does is make sure the ownership documentation underneath all of this is clean: split sheets and agreements that capture the correct splits, PRO affiliations, and IPI numbers, so when you register your work, the paperwork is right and the money flows correctly.